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Recommendation 18: Fund DBSs in a way that allows for commonly accepted 

software development approaches.

Problem 

The current statutory and policy regime does not enable the speed DoD needs to effectively acquire 

DBSs. Funding constraints, in various forms, are key contributors to this problem. One constraint 

applies to the appropriations account and/or program element/budget line item (PE/BLI) from which 

money is spent. Another constraint applies to the point in time at which money is spent.

Because DBS acquisition follows a model similar to that of major weapon systems acquisition, program 

managers (PMs) are required to spend money from different appropriation accounts and PEs/BLIs

based on the acquisition stage. Depending on financial management regulations (FMR) and Military 

Department regulations, DoD may need to fund a specific DBS requirement via Research, 

Development, Test, and Evaluation (RDT&E), Procurement, and/or Operation and Maintenance 

(O&M). These accounts categorize phases of weapon system engineering. When applied to business 

software IT, which by its nature does not have such clear phases, the account categories introduce 

inefficiencies.

PMs must also use different types of funding at different points in time, depending on the years in 

which Congress appropriated those funds and appropriation availability. This requirement prevents 

DoD from modifying DBS funding timetables on a monthly or even weekly basis. To accommodate 

continuous user feedback and changing technical requirements of DBSs, DoD needs the ability to make 

funding modifications with such frequency.

Appropriation system timing and account constraints are commonly known as colors of money in 

defense acquisition circles. DBS experts cite color of money as a major problem.1

Background

In the regular federal budgeting system, Congress appropriates money each year for agency use. This 

money must be obligated within a date range specified by the appropriation in question and may not, 

generally, be obligated beyond that range (see Table 3-3 below).

2 The obligation of these funds is also 

limited to the specific purpose identified in the appropriation.3

Table 3-3. Appropriation Accounts Used by DoD to Acquire Business Software Solutions

Appropriation account Period of availability

Research, Development, Test, and Evaluation (RDT&E) 2 years

Other Procurement 3 years

Operation and Maintenance (O&M) 1 year (some exceptions)4

 

1 Approximately 30 DBS experts, interviews with the Section 809 Panel staff, mid-2017. 2 Balances Available, 31 U.S.C. § 1502. 3 Application, 31 U.S.C. § 1301(a). 4 For example, 1 percent of the Defense Health Agency appropriation is given 2-year availability (de facto carryover authority). 
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Fundamentals of the modern appropriation system are outlined in sections of law originally enacted in 

1809.5 Current law states that regular appropriations “may be construed to be permanent or available 

continuously only if the appropriation... expressly provides that it is available after the fiscal year 

covered by the law in which it appears.”6

DBSs receive funding primarily from three appropriation accounts—RDT&E, Procurement, and 

O&M—all of which have different periods of availability and restrictions on use. PMs cannot use these 

funds interchangeably. For RDT&E and Procurement, program-specific funding is approved by the 

House and Senate appropriations committees after moving through a lengthy POM process within 

DoD.

Unlike RDT&E and Procurement funds, for which control resides at the program element level, O&M 

funding control takes place at a higher level and is not tied to specific programs. Additional constraints 

apply to O&M funding. In practice, a DBS PM’s ability to plan and execute use of funds is restricted 

based on factors such as type of activity on which money is spent, production document scope, dollarcost of purchase, and technical details of system modification.7

For example, DoD financial regulations distinguish between investments and expenses based not simply 

on the qualitative aspects of what is being purchased, but on whether the purchase falls within a dollar 

threshold of $250,000. Investments, greater than $250,000, must be funded via (specifically 

appropriated) Procurement dollars; whereas, expenses, less than $250,000, may be funded via O&M 

dollars.8

 

5 GAO, Principles of Federal Appropriations Law, Third Edition, Volume I, Chapter 4, 4–6, accessed August 10, 2017, 

http://www.gao.gov/special.pubs/3rdeditionvol1.pdf. 6 Application, 31 U.S.C. § 1301(c). 7 For differentiation based on type of activity, see FMR Volume 2A, Chapter 1, Section 010212(B)(1): “The underlying purpose for each 

discrete task within an IT effort determines the correct appropriation for budgeting of that task. An effort that is so broadly defined that 

it contains separate tasks appropriate to budgeting in different appropriations should be separated into discrete tasks, each of which is 

budgeted in the correct appropriation.” For differentiation based on dollar threshold, see FMR Volume 2A, Chapter 1, Section 

010212(B)(4): For DBS modification efforts of less than $250,000, Operation and Maintenance funding may be used. For DBS 

modifications involving “a complete system with a cost of $250,000 or more,” however, PMs must use Procurement funds. These funds 

must be either explicitly appropriated by Congress and programmed by DoD at the PE/BLI level, or reprogrammed from another account 

(which often requires Congressional approval). Differentiation based on production document scope and technical thresholds may 

indicate Service-level decision-making problems in addition to regulatory problems. According to Service-level DBS acquisition officials in 

contact with Section 809 Panel staff in August 2017, if modification requirements are not explicitly listed in a DBS’s current requirements 

document, RDT&E funding must be used for that requirement. Even if the DBS’s requirements document explicitly lists the modification 

requirements in question, if a preponderance of development objects being modified are new, RDT&E funding must be used. Only if a 

majority of development objects being modified are not written from scratch may O&M funding be used. This requirement is important 

because unlike RDT&E and Procurement, O&M spending does not require the initiation of DBS-specific approval years in advance via the 

PPBE and appropriation processes.

8 FMR, Volume 2A, Chapter 1, Section 010212(B)(4). This section of the FMR was codified in Use of Operations and Maintenance Funds 

for Purchase of Investment Items: Limitation, 10 U.S.C. § 2245a, but repealed in the FY 2017 NDAA (Pub. L. No. 114–328).
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Case Study:

Dollar Thresholds Impeding Financial Auditability

In 2016, the Army’s General Fund Enterprise Business System (GFEBS) required new computer code 

to enhance property management auditability reporting. The program contractor estimated that 

writing this code would cost approximately $600,000.9

The program office determined that the work primarily would take the form of newly written code, 

not modifications to existing code. This determination, combined with the fact that the feature’s cost 

rose beyond the FMR’s $250,000 investment threshold, necessitated funding the feature’s 

development with RDT&E appropriations.10

At the time, the program was already in sustainment and had no RDT&E funding. As a result, the 

program had to postpone the addition of this financial auditability feature. As of late 2017, the Army 

requested $1.7 million in FY 2019 and $6.7 million in FY 2020 for GFEBS Increment II RDT&E 

funding.11 Some of this funding, if approved by Congress, presumably will be allocated to the 

development of the GFEBS auditability feature in question.

In addition to constraints created by applying normal appropriations accounts to DBSs, other laws, 

policies, and decision-making bodies may affect DBS spending patterns. These items include the 

statutory 80/20 rule, OMB quarterly apportionment practices, DoD comptroller rephasing practices, and 

Service-level comptroller policies.

As an illustration of these phenomena, Figure 3-7 below shows DoD’s weekly IT contract obligations. 

In addition to the large peak in IT obligations in the final weeks of September (see rightmost bars of 

chart), there are smaller peaks visible throughout the fiscal year.

 

9 Army DBS program office staff, emails to Section 809 Panel staff, August 2017. 10 To some degree, this impediment may have been produced by the Army’s interpretation of FMR language. According to one DCMO 

official, “some Services are known to be more conservative in the way they interpret” the distinction between expenses and investments. 

This situation suggests that part of the problem may be the FMR’s excess complexity—as of August 2017, the document was more than 

7,000 pages long.

11 Assistant Secretary of the Army for Financial Management and Comptroller, “Department of Defense Fiscal Year (FY) 2018 Budget

Estimates: Army Justification Book of Research, Development, Test & Evaluation, Army” (see page 225 of Volume II, Budget Activity 5B, 

under Project EV4, General Fund Enterprise Business System Inc. 2), accessed August 14, 2017, 

https://www.asafm.army.mil/documents/BudgetMaterial/fy2018/vol5b.pdf.
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Figure 3-7. Weekly DoD Information Technology Contract Obligations During FY 201712

A small peak in obligations is visible in the 43rd week of the fiscal year (at the end of July). This 

observation overlaps with the 80/20 rule, under which Congress requires at least 80 percent of singleyear obligations to occur between the months of October and July. Small peaks also occur at midyear, 

the end of each quarter, and the end of most months. These peaks may overlap with temporal 

constraints applied by OMB, DoD, Military Departments, and lower-level organizations.

There are several important and legitimate reasons for imposing time- and account-based constraints 

on normal DoD program budgets. One reason may be that the annual appropriation process allows for 

a regular, standardized oversight process to occur by default. Another issue may be the concern that if 

funding never expires, it may result in large unobligated balances that could be used for inappropriate 

purposes. This second justification was alluded to in the 1980s and 1990s, during which some observers 

viewed certain forms of DoD budget flexibility as “slush funds.”13

Program officials, however, describe the current appropriation system as a major impediment to the 

success of DBS programs. One former DBS PM noted commercial companies do not develop marketcompetitive software IT using the type of siloed-funding model that results from appropriation timing 

 

12 Dataset includes all DoD contract actions coded with Product and Service Codes D3 or 70 from the Federal Procurement Data System, 

https://www.fpds.gov, accessed January 2, 2018. To ensure comparability of data across years, each weekly period contains the same 

days of the week. The first day of the fiscal year (or first 2 days for leap years) are omitted.

13 See, for example, Senator Alfonse D’Amato’s 1985 letter to the U.S. Comptroller General on this issue and the accompanying report:

GAO, Comptroller General of the United States, Potential for Excess Funds in DOD, GAO/NSIAD-85-145, accessed June 27, 2017, 

http://www.gao.gov/assets/150/143300.pdf. In the past, funding flexibilities (such as the M accounts) have been permitted to exist for 

long periods of time but eventually were shut down after accumulating large unobligated balances. The flexibility accounts in question 

were eliminated by the FY 1991 NDAA (Pub. L. No. 101–510). End Q1

End Q2

End Q3

80/20 rule cutoff

End FY

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Contract Action Obligation, Billion USD

Week of Fiscal Year

IT services IT products
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and account constraints. The PM suggested that the main problem was a failure to recognize that as 

users’ needs become clearer, DBS technical specifications change. This fact, however, is not reflected in 

a requirement and PPBE process that attempts to lay out every technical detail of DBSs in advance. One 

DBS PM explained, “If you try to build the fifth floor of your house before the first floor, it isn’t going 

to work.”14

Findings

Time- and account-based funding constraints may address some of the accountability concerns raised 

by oversight officials. These constraints, however, are counter to two key characteristics of software: 

It changes rapidly and constantly.

15 For some DBS programs, these constraints can create serious 

inefficiencies. If a PM wishes to provide new capabilities to end-users based on their feedback from 

previous software releases, the PM must have the ability to modify requirements on relatively short 

notice. To modify requirements on short notice, the PM must be able to access congressionally 

appropriated funding with flexibility regarding time and account. The current DBS funding system 

lacks such flexibility and serves as a major constraint.

Case Study:

Embrace Funding Models That Can Accommodate Older IT Systems

The Air Force’s Aviation Resource Management System (ARMS) is a 30-year-old ACAT III aviation 

information reporting system, historically funded with O&M appropriations.16 Due to its age, it did 

not have any of the documentation associated with the DoDI 5000.02 major program acquisition 

process.

The Air Force determined that required upgrades to the system would have to be carried out using 

RDT&E appropriations, for which DoDI 5000.02 process documentation would be required, causing a 

2-year delay.

17 By loosening the distinctions between O&M and RDT&E, Congress would allow for 

necessary upgrades to older software systems.

Statistical evidence lends some support to the hypothesis that the time periods of appropriation 

accounts are connected to the quality of DBS procurements. A 2013 study focused on U.S. federal 

government IT acquisition projects showed a correlation between funding obligated at the very end of 

the fiscal year and comparatively low quality of project outcomes.18 A 2016 paper reiterated many of 

these points, concluding that although existing data “do not prove that wasteful year-end spending 

exists,” current constraints “may encourage wasteful spending of taxpayer dollars.”19 Senior defense 

officials such as former DoD Comptroller Robert Hale, former Acting Army Secretary Patrick Murphy, 

 

14 Former Army DBS PM, conversations with Section 809 Panel staff, May 2017. 15 Jacques S. Gansler, Commercial Off The Shelf (COTS): Doing It Right, presentation for Acquisition Research Symposium, May 14-15, 

2008.

16 Defense Information Technology Portfolio Repository (DITPR), accessed August 15, 2017.

17 Air Force CIO staff, emails with Section 809 Panel staff, August 15, 2017. 18 Jeffrey B. Liebman and Neale Mahoney, “Do Expiring Budgets Lead to Wasteful Spending? Evidence from Federal Procurement,” 

National Bureau of Economic Research, September 2013, accessed April 26, 2017, http://www.nber.org/papers/w19481.pdf. 19 Jason J. Fichtner and Adam N. Michel, Curbing the Surge in Year-End Federal Government Spending: Reforming ‘Use It or Lose It’ Rules, 

accessed August 7, 2017, https://www.mercatus.org/system/files/mercatus-fichtner-year-end-spending-v1.pdf.
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and former Army Business Transformation Office Director LTG Tom Spoehr have all suggested that 

timing constraints lead to suboptimal spending outcomes.20

Acquisition officials also described funding flexibility as necessary to build effective cybersecurity 

measures into DBSs. In their assessment, when critical needs arise due to unforeseen vulnerabilities, 

flexible funding must be available for the immediate development of new capabilities, as going 

through a formal POM process can take as long as 2 years.21

Case Study:

Using Appropriation Account and PE/BLI Flexibility to 

Promote Business Process Reengineering

The Air Force Way system (AFWay) is an electronic portal that enables users to securely order IT 

hardware, software, and services online. During development of the system’s Version 4.0 technical 

refresh, acquisition personnel leading the effort believed many of the business processes involved in 

ordering IT hardware and services could be made more efficient. Compliance with then-current DoD 

security requirements necessitated a complete rewrite of the application code, which provided an 

opportunity to introduce concurrently the desired business process efficiencies.

The proposed improvements were considered new capabilities that required RDT&E funding. AFWay 

was an aging system with a 20-year-old set of requirements, being funded solely by O&M. As such, it 

not only lacked RDT&E funds, but also lacked a PE/BLI at which to assign such funds.

Because of the inability to use O&M dollars for application enhancements in this case, the proposed 

business process improvements could not be included in the rollout of AFWay’s Version 4.0 in 

2015.22 Congress could mitigate this impediment to improving business processes by allowing for 

more malleable distinctions between DBS appropriation accounts.

 

20 Robert Hale, “Why DoD’s Year-End Spending Needs to Change,” Breaking Defense, September 23, 2016, accessed December 28, 2017, 

http://breakingdefense.com/2016/09/why-dods-year-end-spending-needs-to-change. Changing Management Behavior: Every Dollar 

Counts, U.S. Army Directive 2016-16 (2016). David Vergun, “End-of-year ‘use it or lose it’ budget mindset to get tossed,” Army News 

Service, April 18, 2016, accessed December 28, 2017, https://www.army.mil/article/166098. 21 Air Force IT acquisition officials, conversations with Section 809 Panel staff, June 2017. 22 Air Force CIO staff, emails with Section 809 Panel staff, August 15, 2017.
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Case Study:

Tailoring Funding Timetables to Acknowledge Special Characteristics of DBSs

The Air Force’s Contracting-Information Technology (CON-IT) program is intended to replace the 

outdated Standard Procurement System (SPS) as the departmentwide contract writing system. The 

Air Force used an integrated team of acquisition and contracting personnel to develop an innovative 

acquisition strategy for CON-IT.

By using an existing software solution owned by Defense Information Systems Agency (DISA) and 

outsourcing much of the development and training to USDA, the Air Force anticipated avoiding $83 

million in costs and shortening the program schedule by 23 months.23 The integrated team adopted 

an Agile software development methodology and provided a working prototype in 6 weeks, which 

shortened the program schedule by an additional 3 months.

Because the program succeeded in shortening its timeline by about 2 years, however, the Air Force 

required end-user software licenses much earlier than originally anticipated or budgeted. End-user 

license purchases constitute a system deployment, so they must be purchased using Procurement 

appropriations.

The FY 2018 POM request had already been delivered prior to successful delivery of the prototype 

system. Acquisition officials were able to locate sources of funding in other programs, but none of 

this funding was in the Procurement account, so they could not use it for purchasing end-user 

licenses.

Air Force acquisition personnel anticipated that an initial operational deployment would occur at the 

end of 2017 and broader fielding of CON-IT would occur in late 2018. This timetable was jeopardized

by different appropriation accounts and the complex rules surrounding them.

The Air Force was stymied in deployment because it completed a prototype 23 months ahead of time 

and $83 million under budget. Due to substantial time savings, it lacked Procurement appropriations 

specific to the time period in which the budget originally called for them. Officials estimated that if 

money were not obtained for purchase of end-user licenses in FY 2017, it would cause deployment 

delays and approximately $7 million in added program costs due to simply “waiting for the right color 

of money.”24

By modifying the rules on appropriations timetables and accounts for DBSs, Congress can mitigate 

the unnecessary program delays that exist due to the inherently unpredictable process of Agile DBS 

development.

One senior industry representative advised Congress to “kill the color of money immediately” with 

respect to DBSs.25 He stated that although problems had arisen in implementation, “the concepts are 

sound” behind flexibility mechanisms such as the working capital fund used by DISA.26

Other government representatives outside DoD were less vocal in their condemnation of time- and 

account-based funding constraints. Software developers from the General Services Administration said 

 

23 Ibid. 24 Ibid.

25 Industry organization managing director, conversation with Section 809 Panel staff, June 2017. 26 Ibid.
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that because they focused on delivering capabilities within very short timeframes, color of money was 

rarely a major problem. The software developers did suggest, however, these funding constraints 

might have greater effect on other agencies that run larger-scale development projects. They described 

themselves as favoring working capital fund models for software IT acquisition.27

The effect of color of money on DBS programs can be quantifiably estimated using publicly available 

federal procurement data. If there were a perfectly even distribution of DBS spending within fiscal 

years, about 2 percent of such spending would occur each week. In fact, recent observations show 

approximately 10 percent of IT spending concentrated in the final week of the fiscal year.28

Figure 3-8. Comparison of Military Departments’ Weekly IT Contracting Obligations, FY 201729

Much of the data in the chart are likely not DBS-related, but simply represent the purchase of 

computers and other equipment for day-to-day office use. This analysis, however, quantifies one of the 

most clearly visible ways in which the appropriation system produces skewed incentives for 

IT acquisition.

 

27 GSA employees, conversation with Section 809 Panel staff, June 2017. 28 Section 809 Panel analysis of FY 2017 Federal Procurement Data System data, January 2, 2018. 29 Data from Federal Procurement Data System, extracted via Adhoc Report on January 2, 2018. Dataset includes all DoD contract actions 

coded with Product and Service Codes D3 or 70 from the Federal Procurement Data System, https://www.fpds.gov, accessed January 2, 

2018. To ensure comparability of data across years, each weekly period contains the same days of the week. The first day of the fiscal 

year (or first 2 days for leap years) are omitted.

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Contract Action Obligation, Billion USD

Week of Fiscal Year

Army Navy Air Force Other DoD
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This end-year skewing effect is higher for IT and IT-related products than for any other aggregate 

category of products purchased in substantial quantities by DoD in FY 2017.

Table 3-4. FY 2017 DoD Contract Obligations, By Aggregated Product Code30

PSC PSC description FY 2017 

obligation

Obligation in final 

week of FY 2017

Final week as percent 

of FY 2017 total

69 Training Aids and Devices31 $1.5 billion $384 million 22.9%

70

Information Technology 

Equipment, Including Firmware 

and Software

$7.0 billion $945.6 million 13.6%

19 Ships, Small Craft, Pontoons, and 

Floating Docks $15.1 billion $1.8 million 11.8%

58 Communication, Detection, and 

Coherent Radiation Equipment $12.3 billion $1.4 billion 11.2%

13 Ammunition and Explosives $5.5 billion $581.5 million 10.6%

Conclusions

No meaningful distinction exists among RDT&E, Procurement, or O&M for software systems 

developed according to modular, Agile principles. According to senior DoD IT officials, “Current

appropriations laws and authorities are not aligned with the way technology is acquired for business 

operations.”32 The officials elaborate on the changes that would need to occur to achieve such 

alignment: 

To acquire a technology solution that takes advantage of the latest available alternatives Congress would 

provide flexibility to current appropriations for business system capability needs. To avoid technical debt, 

resources would be available in the appropriation needed immediately for technology capabilities current 

in the marketplace.33

The traditional appropriations model provides a helpful framework when developing complex weapon 

systems over the course of many years. This traditional model, however, is fundamentally 

incompatible with open-architecture business software programs intended to deliver new capabilities 

multiple times per year.

The defense acquisition funding system faces constraints associated with timing, appropriation 

account, and PEs/BLIs. These funding constraints lock DBS development into rigid, predetermined 

pathways fundamentally at odds with widely accepted best practices for commercial software 

development and the continuous engineering nature of software. These best practices include core 

principles of Agile development:

 

30 Data from Federal Procurement Data System, extracted via Adhoc Report on January 2, 2018. Only includes 2-digit product codes with 

FY 2017 DoD obligations greater than $1 billion. 31 PSC 69, Training Aids and Devices, includes some computers and electronic communications equipment. 32 Deputy Assistant Secretary of Defense for Communications, Command and Control, Cyber and Business Systems (DASD C3CB), Study of 

Commercial Practices: Resourcing Alternatives Deep Dive, July 10, 2017. 33 Ibid.
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§ Delivering software on a regular basis, with continuous end-user feedback involves 

simultaneous research, development, acquisition, and sustainment.34 The current system of 

defense appropriation accounts and PEs/BLIs does not acknowledge the fusion of these 

processes in software development.

§ Delivering working software in a span of weeks or months requires a funding system that can 

change the allocation of program resources in such a timeframe.35 The current appropriation 

system does not allow for the allocation or reallocation of resources on these timeframes.

Analysis:

Appropriation Labeling and Decision-Point Blockages

Service acquisition professionals state that the requirement to fund much of IT software 

development via RDT&E imposes a burden “simply because of the word Development within 

RDT&E.”36

This statement suggests that DoD leadership psychology may be one of the problems associated with 

DBS funding. A given piece of software may never be done developing. As connected systems are 

modified, it may require the continual addition of new RICEFW objects. Consequently, program staff 

could potentially justify the funding of many endeavors under RDT&E, Procurement, or O&M. Those 

concerned primarily with legal compliance, however, may tend to default to the most liberal possible 

interpretation of the term development to ensure they avoid violating the law.

By allowing the type of funding flexibilities outlined below, Congress can mitigate the degree to 

which nonprogram officials impede DBS development due to DoD’s overabundance of caution 

regarding fiscal law and regulation.

Ultimately, the more work DBS PMs devote to obligating funds within specific time periods or 

accounts, the less work they devote to ensuring positive outcomes for end-users. For this reason, 

greater funding flexibility is required if DBSs are to deliver value to warfighters at substantially lower 

cost to taxpayers.

Implementation

Legislative Branch

§ Fund DBSs in a way that allows for commonly accepted software development approaches. To 

do so requires flexibility in both time period limits and appropriation account limits. DoD 

cannot effectively manage large IT projects in accordance with best practices without this 

flexibility. Account flexibility recommendations (internal reprogramming) and time period 

flexibility recommendations (carryover authority) are described below.

 

34 See first principle of Agile Manifesto, “Principles behind the Agile Manifesto,” AgileManifesto.org, accessed November 9, 2017, 

http://agilemanifesto.org/principles.html. 35 Ibid, third principle.

36 Air Force CIO staff, conversation with Section 809 Panel staff, August 15, 2017.
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- To address appropriation account constraints and allow Agile, sprint-based software 

development decisions to be made in real time, congressional defense committees should 

allow internal reprogramming for DBSs, provided that each internal reprogramming is

within an individual DBS portfolio. Congress should allow DoD to manage DBS funding 

through internal reprogramming guidelines for reclassifying funds (including maximum 

thresholds). Further, movement of DBS funding across O&M accounts, RDT&E accounts, 

and Procurement accounts of a DBS portfolio should not count against general transfer 

authority and should not require prior approval from congressional committees.

- To address time period constraints, add a section to the annual defense appropriation act

permitting DBS carryover authority of 10 percent up to 6 months. In other words, DoD 

would be empowered to delay the obligation of funds for up to 6 months beyond the end of 

the fiscal year.

§ Repeal the regular appropriations bill section on investment item unit costs to acknowledge 

that, for the purpose of modifying or enhancing DBSs, there is no technically meaningful 

distinction between RDT&E, Procurement, and O&M.37

- In future appropriations acts, omit the section reading, “appropriations which are available 

to the Department of Defense for operation and maintenance may be used to purchase items 

having an investment item unit cost of not more than $250,000.”38

Executive Branch

§ Allow for flexibility across appropriation accounts at the DBS portfolio level, by delegating 

internal reprogramming authority to portfolio leads.

- To address appropriation account constraints, OSD should issue policy or guidance to the 

Comptroller, CMO, and DBS managers. The policy or guidance should specify that DBS 

internal reprogramming should be maintained under the decision-making authority of DBS 

portfolio leads. DBS portfolio leads should be permitted to redistribute available funding 

among their own subordinate DBS program accounts. The CMO would send regular reports 

to the DoD Comptroller detailing all such transfers after the fact, to be incorporated into the 

Comptroller’s internal reprogramming notifications to the congressional defense 

committees.

§ The DoD comptroller and the CMO should issue policy or guidance stating their intent not to 

decrement funding due to DBS portfolios retaining unobligated money within targeted phases 

of the fiscal year. Without this policy or guidance, carryover provisions would be unlikely to 

produce benefits.

 

37 This recommendation would be in keeping with changes under the FY 2017 NDAA. The law repealed Use of Operation and 

Maintenance Funds for Purchase of Investment Items: Limitation, 10 U.S.C. §2245a, which mandated that “funds appropriated to the 

Department of Defense for operation and maintenance may not be used to purchase any item (including any item to be acquired as a 

replacement for an item) that has an investment item unit cost that is greater than $250,000.” 38 Section 8032 of the Consolidated Appropriations Act for FY 2017, Pub .L. No. 115–31 (2016).
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§ Rewrite FMR Volume 2A, Chapter 1, Section 010212(B) to acknowledge that, for the purpose of 

modifying or enhancing DBSs, there is no technically meaningful distinction between RDT&E, 

Procurement, and O&M.

- Eliminate the $250,000 barrier between expenses and investments in FMR Volume 2A, 

Chapter 1, Section 010212(B)(4).

Implications for Other Agencies

§ DoD (or parts of DoD) could serve as a pilot program for changing the U.S. government’s 

approach to funding the acquisition of business software IT. Depending on problems 

encountered and lessons learned, similar approaches could be adopted by other agencies.